Tax Tip #7: Get creative with your monthly bills
No one ever complains about getting paid too early, and your creditors are no exception. If you mortgage payment falls near the first of the month, make your January payment a week early this year.
You have to be careful that your mortgage lender understands that you are making the January payment and not simply making an unscheduled principal reduction. There is nothing wrong with reducing your principal early, of course, and I recommend that you do exactly that if your cash flow allows. But for the purposes of minimizing tax, you’re specifically looking to get another month’s worth of interest on the books.
The same goes for health insurance premiums if you pay your own. If your regular payment date falls in early January, pay it early.
If you own your own business or utilize a home office, you have a lot more leeway here. You can pay your electric, phone and Internet bills a couple weeks early. And you can buy basic office supplies or equipment a little earlier than planned.
Will any of these prepayments make a huge dent in your tax bill? No, probably not. But every dollar not spent paying taxes is a dollar available to be spent on something else in 2014.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities. Check out his new premium service, Macro Trend Investor, which includes a free copy of his e-book, The New Megatrend Investor: The Ultimate Buy-and-Hold Strategy That Will Make You Rich.